A guide to the collective redundancy consultation process

This guidance note explains the obligations on employers when carrying out collective redundancies. A separate Weightmans guidance note explains employers’ individual redundancy obligations.

Whenever an employer is proposing to make redundancies and it recognises a trade union, as a matter of good employee relations and fairness, the employer should collectively consult with the trade union about the proposed redundancies. This is irrespective of the number of redundancies proposed.

When does the duty to collectively consult arise?

Where the employer is proposing to dismiss 20 or more employees at an establishment within a 90 day period or less, then there is a statutory obligation on the employer to consult on a collective basis with representatives of affected employees. This statutory obligation arises whether or not the employer recognises a trade union (section 188(1) Trade Union and Labour Relations (Consolidation) Act 1992 (‘TULRCA’).

In addition to this, there is also a duty to inform the Secretary of State for Business, Innovation and Skills about the proposed redundancies. This is done by submitting form HR1 to The Insolvency Service, who must receive the form at least 30 or 45 days before the first dismissal, depending on whether a 30 or 45 day collective consultation period is required. A copy of the completed HR1 should be given to the employee representatives at the start of the collective consultation process (see below). (Changes to the maximum period of consultation for 100 or more employee reduced from 90 days to 45 days from 6 April 2013.)

What is a 'redundancy'?

“Redundancy” has a wider meaning in the context of collective redundancy consultation than the definition which applies for the purposes of individual fair dismissal legislation (as set out in the Employment Rights Act 1996 (‘ERA’):

a) Under the ERA, redundancy is defined as a disappearing job, a disappearing workplace or a situation where the employer requires fewer employees to carry out work of a particular kind;
b) by contrast, section 188 of TULRCA defines a "redundancy" for collective consultation purposes as a dismissal "not connected with the individual worker concerned". This definition includes the traditional concepts of redundancy under the ERA but:
- will also include the situation where an employer changes employees’ terms and conditions of employment through termination and re-engagement (even if the job functions or place of work of the employees have not changed, the reason for dismissal is not connected with the individual employee); and
- and will include the termination of a fixed term contract earlier than the stated expiry date in the fixed term contract.

What is the meaning of 'dismissal'?

A "dismissal" will include an actual termination by the employer (with or without notice), the expiry of a fixed-term contract which is not renewed on the same terms and may also include a voluntary redundancy where it occurs in response to a proposal by the employer to make redundancies. (Hence a proposal to make only voluntary redundancies may still trigger the obligation to collectively consult). The statutory definition of dismissal focuses on what is happening to the individual employment contract, rather than to the employment relationship as a whole. Thus an employee can be dismissed where the employer brings their current contract to an end, even though he/she continues to be employed by the same employer under a new contract i.e. where an employee is made redundant from their existing job but is redeployed to suitable alternative employment.

Which employees are counted?

It is the number of employees proposed to be dismissed that counts towards the numbers and so agency workers need not be considered provided they truly can be said to be agency workers and not employees. However the information required to be provided as part of the collective consultation process includes information pertaining to agency workers, see below.

Fixed term employees and temporary employees will count towards the numbers unless the fixed term employees have contracts of three months or less or are recruited to carry out a specific task which is expected to end before three months has expired, provided that in either case the employees have not been employed for more than three months. On the basis that casual workers count as employees during the period of their assignment, they too would count towards the numbers if engaged on an assignment.

Fixed term employees whose contracts expire at their stated end date and are not renewed will not count towards the numbers.

Potential new starters will also count towards the numbers if they have been offered and have accepted a contract of employment, even though they have not yet commenced the role. Volunteers for redundancy will also count towards the 20 + employees.

However collective consultation should take place with appropriate representatives of affected employees. Affected employees are not just those employees who may be at risk of redundancy but also employees who will be impacted by the redundancy measures e.g. they may be required to take on additional work, be subject to a new system of work or have a change of reporting line. Further, the employer must take care not to forget to consult ‘atypical’ affected employees such as:

employees on long-term sick leave;
employees on maternity/additional paternity leave;
some fixed term employees (except for those described above);
part-time employees;
workers who could arguably be classed as employees;
employees on sabbaticals;
employees on career breaks;
employees on holiday; and
employees on secondment.

20 or more redundancies in 90 days?

The statutory ‘trigger’ looks at a rolling period of 90 days to see whether an employer's proposal will result in 20 or more dismissals in any 90 day period. A dismissal takes effect on the date when the employment contract comes to an end, e.g. a dismissal on notice will therefore take effect when notice expires, rather than when notice is given.
An employer can legitimately avoid the collective consultation obligation by deliberately staggering the dismissals in small batches over a longer period.
When determining whether or not 20 or more dismissals are proposed, no account is taken of proposed dismissals in respect of which the statutory collective consultation has already begun. For example, suppose that an employer has proposed 30 redundancies and begins collective consultation. It then proposes to make another 10 redundancies within the same overall period of 90 days. Because statutory collective consultation has already commenced on the original 30 redundancies, the subsequent 10 redundancies can be viewed in isolation and there will be no obligation to collectively consult about them.

A word of caution though. If an employer proposes to dismiss as redundant 10 employees and then a further 12 employees are proposed within a 90 day as the total number of redundancy proposed is over 20, then the statutory collective consultation obligations will kick in.

What is an 'establishment'?

It has been understood that “Establishment” means the unit to which the proposed redundant workers are assigned to carry out their duties and in the vast majority of cases, a specific geographical location would count as one “establishment”. In the recent case of USDAW –v- WW Realisation Ltd the EAT held that the words “one establishment” should be disregarded. However, this was appealed to the ECJ, who held that the establishment is the unit to which the workers made redundant are assigned to carry out their duties. We are awaiting the Court of Appeal’s decision on the USDAW case following this but it is likely to overturn the EAT decision. This effectively meant that the question is not whether or not the employer proposes to dismiss 20 or more employees in that particular workplace but rather within its business.

When should consultation start?

An employer is obliged to enter into collective consultation where it is “proposing to dismiss” as redundant 20 or more employees at one establishment. This means that:

consultation must begin while the employer’s proposals are still at a formative stage: the employer cannot properly consult over something that has already been decided;
before the duty to collectively consult arises, however, the employer's decision-making process must be sufficiently well advanced to have identified the fact that over 20 employees may be dismissed as redundant at one establishment within a period of 90 days or less. (Note also that an employer may "propose" redundancies even though alternatives to redundancy are also being considered).

The overriding obligation under section 188 TULRCA is that consultation should begin "in good time" before the first of the redundancies take effect. TULRCA also states that specific minimum periods must elapse between the start of the consultation process and the date of the first dismissal, depending on the number of dismissals being proposed:

where the employer is proposing to dismiss 100 or more employees within a 90 day period, consultation must begin at least 45 days before the first dismissal takes effect;
where the employer is proposing to dismiss between 20 and 99 employees in a 90 day period, consultation must begin at least 30 days before the first dismissal takes effect.

[NB above there are some potentially important differences between the Directive and TULRCA, including with regard to the timing of the consultation process. Brief details are set out on the next page.]

The 45 and 30 day periods are minimum requirements: in some cases, these minimum periods may in reality be insufficient for there to be proper consultation on all the issues about which the employer is obliged to consult, particularly where fixed holiday periods, such as factory shutdowns, occur during the consultation process.

Given that “good time” is judged according to how much time is left until the proposed date on which the first redundancies are to take effect, the employer must form a view on:

the likely date of the first of the collective redundancies taking effect, assuming that adequate negotiations take no more time than could be reasonably expected and that negotiations take place with willingness and good faith on both sides towards reaching an agreement; and then
how long it could reasonably be expected to take to negotiate an agreement covering at least the subjects which TULRCA requires to be considered (see below).

A separate duty to inform and consult may, however, arise much earlier if there is an information and consultation agreement in force. The Standard information and consultation provisions, for example, require the employer to inform and consult with a view to reaching agreement over "decisions likely to lead to substantial changes in work organisation or in contractual relations". This could mean discussing business decisions that could potentially lead to redundancies, before those decisions are made. However speculative proposals will not fall into this category until they become plans which are likely to happen.

Consultation will typically begin with the announcement of proposed redundancies and the provision of information to the employee representatives (see below). Where it is necessary to elect those representatives, consultation cannot begin until after the representatives have been elected. The date on which the requisite statutory information is provided to the representatives (or, where not all information is provided at once, the date on which sufficient statutory information is provided for meaningful consultation to take place) will typically be taken to be the date on which consultation begins.

What information does the employer need to supply and consult on?

The obligation on the employer is to consult "appropriate representatives" of “any of the employees who may be affected by the proposed dismissals or by measures taken in connection with those dismissals” (section 188(1), TULRCA). The employer must therefore identify first the affected employees and thereafter their appropriate representatives.

Identifying the affected employees

The "affected employees" are both those immediately at risk of dismissal and also those affected by measures associated with the proposed redundancies. In the context of collective redundancies “measures” is likely to include any organisational step taken in connection with or as a result of the proposed redundancies, such as new systems of work, new working hours or arrangements, proposed variations to contracts of employment and new reporting lines.

Identifying the appropriate representatives

"Appropriate representatives" is an umbrella term, covering three separate potential categories of representatives:

representatives of a recognised trade union;
directly elected representatives; or
a standing body of elected or appointed representatives not specifically elected for the purpose of redundancy consultation.

Trade union representatives

Employers must consult with trade union representatives rather than any other category of representative where the affected employees fall within a bargaining unit in respect of which an independent trade union is recognised by the employer (section 188 (1B) TULRCA). This is even though not all affected employees in the bargaining unit may be members of the trade union. There may also be additional and slightly different obligations to consult with other representatives under a Works Council or Staff Forum agreement. A thorough search needs to be carried out to ascertain what collective, recognition, framework, works council or staff forum agreements exist.

Where there is a recognised union, but it does not cover all the affected employees, then the employer must consult other appropriate representatives in respect of those employees who are outside the bargaining unit.

Choosing whom to consult if there is no trade union

Where there is no recognised trade union in respect of the affected employees then the employer may choose to consult either:

representatives directly elected for the purpose by the affected employees (and there are specific statutory rules under section 188A TULRCA which govern the election of such employee representatives

OR
a standing body of elected or appointed representatives (such as a national works council or staff forum) who were not specifically elected for the purpose of redundancy consultation but who nevertheless have authority from the affected employees to receive information and to be consulted about the proposed dismissals on their behalf (section 188(1B)(b), TULRCA).

In practice, most employers will choose to consult with representatives directly elected by the affected employees rather than a standing body of representatives as there are certain advantages in choosing the former – not least the certainty that they have the authority to enter into the collective redundancy consultation. If the numbers involved are not substantial, and there are no appropriate representatives, then employees may decide not to hold elections. If so, the employer can continue with the redundancy process after a reasonable period, with the employees being provided with the statutory information and consulted with on an individual basis. Even if a minority of employees wish to hold elections, they are entitled to do so and their appointment should be for all future redundancy exercises (which is more efficient and safer for future exercises). If the number of candidates in each constituency is the same as the number of proposed representatives, it is logical to simply appoint the candidates rather than vote them in if their success is guaranteed.

The number of representatives needed to conduct collective consultation is not specified by law but employers are expected to ensure there is a sufficient number to properly represent the interests of the affected employees. You should also take account of the number and type of employees affected and any unusual circumstances such as widespread geographical locations or varying shift patterns. Link to Ballot Form for the election of representatives and link to notice confirming election of elected representatives.

According to section 188(4) TULRCA, the following information must be provided by the employer as a minimum: Please see Letter to Trade Union and elected representatives - start of collective consultation.

the reasons for the proposed dismissals;
the number and descriptions of employees whom it is proposed to dismiss as redundant;
the total number of employees of any such description employed by the employer at the establishment in question;
the proposed method of selecting employees who may be dismissed;
the proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect
the proposed method of calculating the amount of any redundancy payments to be made (over and above the statutory redundancy payment) to employees who may be dismissed
the number of agency workers working temporary for the Company, the areas in which they are working and the type of work they are carrying out; and
the HR1 Form

This information must be provided in writing to either the appropriate representatives, once elected, or to the recognised trade union representatives. The only circumstances in which the information should instead be provided to all of the affected employees is where they have failed to elect representatives within a reasonable time frame.

The information must be provided to the employee/union representatives in a sufficiently understandable form as to enable meaningful consultation to take place: the representatives must have an adequate opportunity to fully understand the issues over which they are being consulted - the proposed measures, their effect, and the reasons for them, etc.

It is not necessary for the employer to provide all of the statutory information at the outset of the consultation: consultation can be deemed to have commenced as long as the employer has provided sufficient information to enable meaningful consultation to take place. For example, the employer may not initially be ready to give details about proposed selection criteria and how the process of selection will be undertaken. This information could instead be provided at a later stage, after consultation has begun about ways of avoiding or reducing the redundancies.

The information to be provided to employee/union representatives should break down the proposed dismissals by categories of employee and identify the total number of employees in each category employed at the establishment. At this stage the employer will also need to identify appropriate redundancy pools and establish whether selection for redundancy is required: where all of the employees in the selection pool are to be dismissed then no selection criteria will be required; however, selection criteria will be required where the proposal is to reduce the numbers of employees in the pool. Our guidance on redundancy deals with the issue of pooling and the selection process.

The information provided to the representatives must set out proposals for any redundancy payments over the statutory basic entitlement. As a starting point, the employer will need to consider whether there are existing, expressly agreed redundancy severance terms or terms which apply by custom and practice. If there are no existing terms then the employer will have to formulate some (assuming that it proposes to pay more than the statutory minimum). When doing so, consideration will need to be given to matters such as:

does the employer want to establish (typically more favourable) voluntary terms as well as compulsory terms (to provide an incentive to volunteer)?
communicating the proposed terms in a manner which prevents those terms acquiring contractual force through custom and practice (e.g. stating that the terms have been adopted for the purposes of the specific redundancy exercise and that there is no obligation to apply the term in any future redundancy exercise);
the employer reserving the right to select volunteers according to business needs;
will employees be required to sign compromise agreements in return for enhanced redundancy payments?
will employees be required to work their notice periods or stay until any defined point in time, and how will the payments will be treated for the purposes of tax?

From a practical, rather than legal point of view, in addition to the statutory information letter to be provided to the representatives of the affected employees, the employer will need to prepare an overall communication process so that they – rather than the representatives – control the ongoing communications strategy. Employers should also take care to identify employees on long-term sick leave, maternity, paternity , adoption or parental leave, secondment and holiday, ensuring that they are included in any communication process. In addition to employee communications, the employer may need to develop appropriate communications to customers and suppliers, as well as Stock Exchange announcements (where relevant), letters to local MPs and press releases.

The process of collective consultation

According to section 188(2) TULRCA, the subject matter of the consultation must include ways of:

avoiding the dismissals;
reducing the number of employees to be dismissed; and
mitigating the consequences of the dismissals;

and must be undertaken by the employer “with a view to reaching agreement with the appropriate representatives”.

An employer must consult over the business reasons for the redundancies as part of the obligation to consult over ways in which the redundancies can be avoided. For example, if an employer is proposing to close a particular site, which will result in the loss of jobs, consultation on avoiding the redundancies should include consultation about whether or not the site should close and about alternative solutions which would keep it open.

In addition to consulting over the proposed dismissals, an employer should also consult over the proposed ‘measures’ to be taken in connection with those proposed dismissals (e.g. new reporting lines or organisational arrangements as a result of the proposed redundancies). It should be noted that there may also be an obligation to consult about ‘measures’ under an information and consultation agreement, depending on the type and scope of that agreement.

In the light of this, the employer must be clear about the business case for the proposed redundancies and have collated any relevant supporting documentation to be provided during the consultation. The aim must be to provide the representatives of the affected employees with a clear explanation of the business case, supported by the relevant information, so as to allow them an opportunity to fully understand the proposals and prepare their response.

In addition, and given the need to consult about ways of reducing or avoiding the proposed redundancies and about mitigating the consequences of the proposed dismissals, the employer should provide the representatives with details of, and be ready to discuss, matters such as its considerations to-date about the alternatives to making redundancies (e.g. short-time working or job sharing), and the opportunities for redeployment, voluntary redundancies, etc.

Consultation with a view to reaching agreement

Case law has established that fair collective consultation involves the employer:

consulting when the proposals are still at a formative stage, when no decision has been made that the redundancies will go ahead;
entering into consultation with an open mind and with a willingness to be persuaded.

Consultation should be “genuine” and careful consideration should be given to views and feedback expressed to the employer. Evidence of a closed mind or “going through the motions” will not stand the employer in good stead with a tribunal.
providing the employees through their representatives with adequate information on which to respond and adequate time to liaise with the employees they represent;
giving the representatives/employees a fair and proper opportunity to fully understand the issues and to express their views and those of the employees they represent (and good practice will mean ensuring the representatives have the facilities to do this, such as the use of a meeting room, computer, photocopier and access to employees in work time);
providing adequate time for the representatives to report back to the employer;
conscientiously considering the response to the consultation; and
providing a well-reasoned written response to the employees’/ representatives’ queries and comments, and making compromises where practicable.

On a practical level it is recommended that a timetable and outline agenda for the consultation process is discussed and agreed at the first consultation meeting with the representatives of the affected employees. The following approach may be appropriate:

the first consultation meeting should be used to communicate the proposals, seek agreement on the timetable for consultation, arrange the necessary meetings and try to seek agreement on the use of voluntary redundancies. Redeployment may also be usefully considered at this stage;
the purpose of the next consultation meetings would be for the union to respond to the proposals and for detailed consultation to take place on whether the redundancies can be avoided or reduced, alternatives to redundancy, and the appropriateness of the proposed selection pools.

Thereafter, consultation should be about the process of implementation, including the selection criteria, how they will be applied, how the individuals will be consulted, and proposed timescales. Alternative employment and other forms of support for those dismissed may also be discussed at this stage. The employer needs to think about when the redundancies are likely to take place and whether it needs to retain some staff until the end of certain projects and/or for any “handover” periods.

It is advisable for the organisation to have its own note taker at each consultation meeting so that proper notes can be taken. At the end of each meeting it can be useful to make a note of what items have been agreed as part of the consultation process and what items remain to be consulted on; this can assist keeping under review what matters remain outstanding. Some companies will choose to update the workforce on how collective consultation is progressing by issuing a Question and Answer document to the workforce or something similar. Whilst there is no obligation on an organisation to do this, it can be useful to ensure that consistent answers to questions are being communicated to the workforce and to ensure that all employees are covered (for example in unionised environments where not everyone is a union member).

There are two limited (and rare) circumstances in which an employer may be excused from the need to enter into full collective redundancy consultation. (Both represent a high risk for the employer and it is recommended that legal advice be sought if it is believed that either situation applies):

Where employees fail to elect representatives: where the employer has invited the affected employees to elect representatives and they fail to do so within a reasonable time, the employer is released from the obligation to collectively consult. Instead, the employer's only obligation is to give each affected employee the information required in section 188(4) However, given that the employer has the responsibility for organising the election, this exception is extremely unlikely to occur in practice;
The "special circumstances" defence: where there are "special circumstances which render it not reasonably practicable" for the employer to comply with the requirement:
- to begin consultation in good time and at least 30 or 45 days (as applicable) before the first dismissal; or
- to consult with a view to reaching agreement about ways of:
  - avoiding dismissals;
  - reducing the numbers of employees to be dismissed; and
  - mitigating the consequences of the dismissals; or
  - to provide the statutory information under section 188(4);
- then the employer "shall take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances" (section 188(7) TULRCA).

There is no generic category of "special circumstances", and the existence of special circumstances is therefore judged on the facts of the case although it is unlikely that anything but the most exceptional situations will be judged as being special. The burden of proof is on the employer to show the existence of special circumstances and also to show that such steps as were reasonably practicable were taken to comply with the particular requirement concerned.

Enforcement

Complaints can be made to an Employment Tribunal in relation to a breach of the statutory rules governing the election of employee representatives and in relation to a failure to inform and consult more generally. If the tribunal finds a complaint well founded, it must make a declaration to that effect and it may also make a protective award. As explained below, protective awards can be very expensive for an employer

A protective award can be up to 90 days’ gross actual pay for every affected employee in respect of whom the employer has failed to comply with any of the collective redundancy consultation requirements. (Note that the maximum level award of 90 days’ pay can still be applied despite the reduction in the maximum consultation period from 90 to 45 days). The purpose of the award is to compensate the employees for the loss of the benefit of consultation rather than for their individual financial loss. Consequently, receipt of wages during the protected period will not reduce that employee's entitlement under the protective award.

The length of the protected period is at the tribunal's discretion. The tribunal must make such award as they consider "just and equitable in all the circumstances having regard to the seriousness of the employer's default", subject to a 90 day maximum in all cases. The Court of Appeal has established the following principles:

the purpose of a protective award is to provide a sanction for the breach of the obligations under section 188 by the employer. It is not to compensate employees for any loss which they have suffered as a result of the breach;
the tribunal's discretion to do what is just and equitable is very wide but it should primarily focus on the seriousness of the employer's default, which will vary from a mere technical breach to a complete failure to inform or consult under section 188;
the tribunal may wish to consider whether the failure was deliberate and whether legal advice was available to the employer about its obligations;
it is entirely appropriate in a case where there has been no consultation at all for the tribunal to start with the maximum permitted protective award (i.e. 90 days) and to then examine whether there are any mitigating circumstances which would justify this maximum period being reduced.

As an illustration of how expensive it can be if an employer fails to fulfil its collective redundancy obligations: if the average salary of those being made redundant is £26,000 and 40 employees are dismissed, that is maximum liability of £260,000. Such claims for breach of Section 188 cannot be settled in advance of Tribunal proceedings by a Compromise Agreement, but only via ACAS conciliation.

How does the European Directive differ from TULRCA?

The collective consultation provisions of TULRCA differ from those of the European Collective Redundancies Directive in a number of important aspects. These differences are of particular relevance for employers against whom the Directive can be directly enforced. These include emanations of the state such as government departments, local authorities, health authorities, further education corporations, police authorities and NHS trusts. In addition, case law has established that privatised utilities such as electricity and water companies could also fall into this category.

The key differences between the obligations under the Directive and under section 188, TULRCA can be summarised as follows:

Under the Directive, the obligation to consult arises where collective redundancies are "contemplated" as opposed to when they are "proposed" under TULRCA. The Directive is generally accepted to require consultation to begin at an earlier stage than when an employer "proposes" dismissals. (However, much of the importance of this difference has been removed by the amendment of both the Directive (in 1992) and TULRCA (in 1993) to require consultation to commence "in good time". This means that the focus is now on the adequacy of the period allowed for consultation rather than the consultation commencing at any particular stage in the decision-making process (see above)) ;
There are no minimum time periods for consultation in the Directive. Consultation must begin in good time;
Although TULRCA requires 20 or more collective redundancies to take place at one establishment, there is no such requirement in the Directive. The Directive simply refers to 20 redundancies over a period of 90 days. It can therefore be argued that for emanations of the state, any proposal which could lead to 20 or more redundancies occurring within any 90-day period anywhere in the organisation will trigger an obligation to collectively consult. This issue could be of particular importance for the privatised former public utilities who may have substantial operations at a number of establishments and where the obligation to consult could very easily be triggered;
Under the Directive, the employer has a wide obligation to provide "all relevant information" to representatives for the express purpose of enabling the representatives to make constructive proposals. In contrast, TULRCA lists the information which must be provided (section 188(4), TULRCA);
The "special circumstances" defence to a failure to consult under TULRCA has no equivalent in the Directive.